An affiliate of a Venezuelan media conglomerate is suing to block a deal by News Corp. and DirecTV Group to restructure their satellite television properties in Latin America.
NEW YORK (Reuters) -- An affiliate of a Venezuelan media conglomerate is suing to block a deal by News Corp. and DirecTV Group to restructure their satellite television properties in Latin America.
The suit, filed by Darlene Investments Oct. 18 in a Florida court, alleges that the deals lined the pocket of News Corp. chairman Rupert Murdoch at the expense of other investors.
Darlene Investments, which owns 14% of DirecTV Latin America, is controlled by Venezuela's Cisneros Group.
The investment group is seeking more than $1 billion in damages for "fraud committed by News Corp. and DirecTV prior to the transactions," it said in a statement.
The suit stems from a series of deals, reported by ELW, that helped simplify and reduce News Corp.'s exposure in a volatile economic region and created satellite television monopolies across Latin American markets.
News Corp. agreed to sell its stake in Sky Latin America to DirecTV Latin America for $579 million. DirecTV owns 86% of DirecTV Latin America. Darlene owns the remaining 14%.
Darlene alleges that the transaction "was designed primarily to deliver improper benefits to News Corp." by undervaluing DirecTV Latin America.
At the time, Wall Street analysts hailed the deal as an immediate boost to the global media conglomerate controlled by Murdoch. They said it was a potentially good deal for DirecTV, which News Corp. controls through a 34% equity stake. But the benefits to DirecTV would take far longer to realize.
"It's ridiculous to suggest that News Corp. benefited from the consolidation of the Latin American platforms at the expense of DirecTV," News Corp. spokesman Andrew Butcher said. "Everyone on Wall Street agreed that it was a good deal for DirecTV. That's why the stock went up immediately following the deal."